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Lecture

1BB3 JAN 29

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Economics January 29 , 2013 Lecture Notes Productivity: The quantity of goods and services that a worker can produce for each hour of work. Determinants of Productivity: 1. Physical Capital 2. Human Capital 3. Natural Resources (renewable, non-renewable) 4. Technological Knowledge Production Function: Shows how we combine inputs to produce output Equation: Y = A * F (K, L, H, N) Y = Output A = Technology K = Physical Capital L = Labour H = Human Capital N = Natural Resources If a production function exhibits constant returns to scale, then doubling all inputs leads to a doubling of output. Examples: 1. 2Y = A * F(2K, 2L, 2H, 2N) 2. 100Y = A * F(100K, 100L, 100H, 100N) 3. xY = A * F(xK, xL, xH, xN) 4. (Y/L) = A * F(K/L, 1, H/L, N/L) Diminishing Marginal Product Product: Output Marginal product: The extra output produced by increasing an input by 1 unit Diminishing Marginal Product: The extra output produced by ad
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